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Form ADV Part 1A Item 5F(2)(b) · Answer type: currency · Item 5F - Regulatory Assets Under Management
Item 5F(2)(b) is the firm's non-discretionary regulatory assets under management (RAUM) in U.S. dollars. This shows the portion of regulatory AUM where the adviser provides ongoing supervision but does not have discretionary trading authority - clients retain approval rights over individual transactions.
Non-discretionary management means the adviser recommends trades, portfolio changes, or investment decisions but must receive client approval before executing them. The adviser provides continuous oversight, monitoring, and recommendations, but the client maintains final authority over buy and sell decisions.
This arrangement appeals to clients who want professional ongoing advice but prefer to retain control over their portfolio transactions. Some clients use non-discretionary relationships to learn about investment decisions, stay involved in the process, or maintain approval rights for tax, timing, or personal preference reasons.
5F(2)(b) represents the other half of the regulatory AUM split alongside 5F(2)(a) discretionary RAUM. Together, they add up to 5F(2)(c) total RAUM.
Non-discretionary arrangements can slow portfolio management because advisers must communicate with clients before acting on opportunities or market changes. However, they provide client control and transparency that some investors value more than speed of execution.
Some firms operate both models, offering discretionary management for clients who want efficient professional management alongside non-discretionary services for those preferring approval control. Other firms focus primarily on one approach or the other.
The non-discretionary vs discretionary distinction applies only to trading authority, not to other advisory services. Both types of accounts can receive the same investment research, planning advice, reporting, and client service levels.
5F(2)(b) - Non-discretionary regulatory assets under management (currency).
This is one field in Item 5F, "Regulatory Assets Under Management." The firm reports the dollar value of assets under non-discretionary management as of its Form ADV reporting date.
Non-discretionary RAUM shows how much of the firm's regulatory assets operate under advisory arrangements where clients retain trade approval rights. Higher non-discretionary percentages often indicate client bases that prefer control over individual investment decisions.
If you want to approve each trade personally or stay actively involved in investment decisions, look for firms with substantial non-discretionary RAUM or ask about advisory-only arrangements. If you prefer professional management without per-transaction involvement, focus on firms with larger discretionary assets.
A large 5F(2)(b) does not tell you the adviser's investment skill, trading frequency, or performance results. Some non-discretionary advisers provide excellent recommendations that clients typically accept, while others struggle with decision implementation delays when clients hesitate or disagree with advice.
The figure also does not indicate fee structures, minimum account sizes, or service levels. Non-discretionary and discretionary arrangements often carry the same fee rates and service commitments, differing mainly in decision-making authority.
Non-discretionary arrangements do not eliminate adviser influence or responsibility. Advisers still provide ongoing portfolio supervision, investment recommendations, and professional guidance. The client approval requirement affects implementation timing but not the adviser's duty to provide suitable advice.
The value is a dollar amount in regulatory AUM as of the Form ADV reporting date. For example, 25000000 represents $25,000,000 in non-discretionary RAUM.
On the firm's Best Investors ADV panel, find Item 5F and look for the non-discretionary row labeled 5F(2)(b). Compare this figure to 5F(2)(a) discretionary RAUM to see the firm's management authority mix. The two should add up to 5F(2)(c) total RAUM.
If 5F(2)(b) is much larger than 5F(2)(a), the firm primarily operates with client-approval arrangements rather than discretionary trading authority. If both figures are substantial, the firm serves both types of client preferences.
Also check 5F(2)(e) non-discretionary account count to understand the number of accounts represented by the non-discretionary dollar figure. Dividing dollars by accounts gives rough average account size for context.
A zero or blank 5F(2)(b) when other Item 5F fields show data typically means the firm operates primarily or exclusively with discretionary trading authority.
When evaluating firms, ask about their non-discretionary offerings, client communication processes for trade approvals, typical response times expected from clients, and whether they allow switching between discretionary and non-discretionary arrangements.